.The Russell 2000 may have a profits problem.Though the small-cap index obtained 10.1% in July, it's dropped roughly 4% up until now in August, as of Thursday morning.ALPS' Paul Baiocchi earns the unstable moves to the index's overall arrangement, along with an estimate coming from Apollo Global showing 40% of those companies have damaging incomes." [Capitalists] have basically surrendered themselves to the reality that through remaining in the Russell 2000, I am actually merely heading to need to take the excellent along with the poor," the company's principal ETF strategist informed CNBC's "ETF Edge" this week.To stay clear of the earnings pain, Baiocchi recommends clients prioritize high quality firms, looking at additional particular exchange-traded funds including his agency's O'Shares U.S. Small-Cap Top Quality Reward ETF Portions (OUSM)." The idea is top quality firms that pay and develop their rewards, and also importantly, possess much less volatility than their peers," he mentioned. "It enables consultants and also clients that have found little limits go sidewards for five years to become designated to a group that is actually dragged." Along with its own success display, the fund consists of just 107 stocks u00e2 $" a portion of what's inside the Russell 2000. Its own top 3 holdings are Tradeweb Markets, Juniper Networks and Old Commonwealth International, each sitting at a roughly 2% weighting in the fund, every FactSet.Shares of the small-cap fund are down 1.5% month to date u00e2 $" outperforming the Russell by greater than 2 percentage aspects because time.Disclaimer.